4.3.1 Introduction
European consumer protection law has its roots in Article 153 of the Treaty establishing the European Community (EC Treaty).175
The values provided by this Article – information, education, health, economic and legal - are worked out in more detail in a variety of European Directives. Some of these Directives mainly look at consumer protection, others have an indirect effect on it.
A general set of European consumer protection standards does not yet exist. The basis of European consumer law is formed by a fragmented collec- tion of regulations. None of these regulations are specifically drafted to- wards the use of DRM system. Protection of consumer interests and expec- tations towards products and services affected by DRM systems has to be sought in the various Directives that provide a more general framework of consumer protection law. That is, consumer protection law, as laid down in these Directives, might offer protection in the various phases in which a consumer interacts with the provider of products and services.
The first phase can be described as the pre-contractual phase. That is the phase in which the consumer is partly taking his decision to make a pur- chase on the basis of provided information by the provider of the commodity in question. The provision of some information on the use or working of DRM technology might be required under the relevant Directives. Protec- tion might also be offered during the contractual phase, in which contracts that accompany DRM systems are concluded. In the post-contractual phase provisions that look at product conformity may come into play. This section discusses the following interests and relevant Directives:
• Transparency: the Electronic Commerce Directive, the Distance Contract Directive, the (proposal) Unfair B2C Commercial Practices Directive
• Contracts: Unfair Contract Terms Directive and Directive on the Sale of Consumer Goods and Guarantees
• Privacy: the European Privacy Directive.
It should be noted that this is not a strict division, in the sense that the Di- rectives may cover aspects of more than one topic. The Distance Contract Directive, obviously, addresses aspects of contracting. It is discussed under Transparency for its relation to the Electronic Commerce Directive and the transparency of contract terms it partly addresses (see hereafter Transpar- ency). But before these interests are looked into in greater detail, first a brief distinction is made between products and services, and second the term consumer is examined.
175
Article 153(1) EC Treaty reads: “In order to promote the interests of consumers and to ensure a high level of consumer protection, the Community shall contribute to pro- tecting the health, safety and economic interests of consumers, as well as to promot- ing their right to information, education and to organise themselves in order to safe- guard their interests.”
Product and Service
It is important to make a distinction between products and services, as this may determine the applicability of a specific Directive. Some Directives do not apply to either products or services. Consequently, the protection they might provide is withheld for one of them. Definitions of product and ser- vice may vary over the Directives, and it is sometimes questionable if a Di- rective covers them at all.
Somewhat general definitions are given in the first Article of Directive
98/34/EC as amended by Directive 98/48/EC:176
• 1(1): “product”: any industrially manufactured product […] (e.g. CDs)
• 1(2): “service”: any Information Society service, i.e., any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services (examples may be the online distribution of music, software and other information goods.)
Consumer
Consumer is defined in throughout different European Directives relatively homogenously. The core description states that a consumer “shall mean any natural person, who is acting for purposes which are not related to his trade, business or profession.”177 This definition may exclude small businesses and
libraries from protection. Furthermore, in many other European legislation heterogeneous definitions and understandings of “consumer” can be found.
European consumer policy is based on the idea of the average consumer. The applicability of legal provisions, the level of protection an individual consumer may enjoy, is related to and depends on the action an average consumer would and should employ in the circumstances in question. A person who does not even bother to look at the contract terms governing his DRM-implemented e-book, might not get the protection he seeks when he needs it. The image and meaning of the average consumer will be analysed further under the (proposal) Unfair B2C Commercial Practices Directive in the next section.
4.3.2 Transparency
Considered legislation:
• Distance Contract Directive178
176
Directive 98/34/EC of the European Parliament and of the Council of 22 June 1998 laying down a procedure for the provision of information in the field of technical stan- dards and regulations, available at
http://europa.eu.int/comm/enterprise/tris/98_34_ec/index_en.pdf. Directive 98/48/EC of the European Parliament and of the Council of 20 July 1998 amending Directive 98/34/EC laying down a procedure for the provision of information in the field of tech- nical standards and regulations, available at
http://europa.eu.int/comm/enterprise/tris/98_48_EC/index_en.pdf. Article 2(a) E- commerce Directive.
177
See for example, article 2(e) Electronic Commerce Directive, or article 2(a) Directive on the Sale of Consumer Goods and Guarantees.
178
Directive 97/7/EC of the European Parliament and of the Council of 20 May 1997 on the Protection of Consumers in Respect of Distance Contracts (Distance Contracts Directive), OL, L 144, June 4, 1997, available at
• Electronic Commerce Directive179
• Unfair B2C Commercial Practices Directive (proposal)180
The transparency of information concerning the use of DRM systems is es- sential for consumers to make an informed and well-balanced decision to- wards purchases of products and services. The implementation and working of DRM systems may not be clear to consumers. For example, they may be unaware that a DVD purchased overseas cannot be played back home due to region-specific coding, or that their personal data are being processed when using an online service. It is important that consumers are well informed on commercial transactions to protect their interests.
Concerning both products and services four important transparency questions can be asked:
• Are DRM systems used?
• How are DRM systems used: how do they work?
• What are the terms and conditions governing DRM systems?
• Who is the implementer of DRM systems? How to contact this imple-
menter?
The first two questions concern the transparency of the implementation and working of DRM technologies. The legal provisions related to this issues will be analysed in light of the (proposal) “Unfair B2C Commercial Practices” Di- rective. The provisions of this Directive will be illustrated by a more con- crete example in which transparency is at issue: labelling of products that contain DRM systems. European consumer policy and examples of recent national case law will be looked at to see how consumers may be shielded against a lack of clear labelling on packages of CDs that contain DRM tech- nologies, and how the provision of core product information may facilitate greater transparency and more informed consumer choice.
The third question relates to transparency of used contract terms. It will be addressed to some extent in the discussion of the Distance Contract Di- rective and Electronic Commerce Directive. It will also come back in the fol- lowing section on Contracts.
The fourth question looks at transparency of information about the user of DRM technology. It is mainly discussed under the already mentioned Dis- tance Contract Directive and Electronic Commerce Directive. First though, attention is given to national legislation in another, familiar field of law that
179
Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on Certain Legal Aspects of Information Society Services, in Particular Electronic Commerce, in the Internal Market (Electronic Commerce Directive), OL, L 178, 17 July 2000, available at
http://europa.eu.int/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg =en&numdoc=32000L0031&model=guichett.
180
Proposal for a Directive of the European Parliament and of the Council concerning unfair business-to-consumer commercial practices in the Internal Market and amend- ing directives 84/450/EEC, 97/7/EC and 98/27/EC (Unfair Commercial Practices Di- rective), available at
http://europa.eu.int/comm/consumers/cons_int/safe_shop/fair_bus_pract/directive_pr op_en.pdf.
seeks to answer to most of the transparency questions posed. Not European consumer protection law as such, but an interesting initiative that might of- fer more protection.
German Transparency Provision in Copyright
A legal provision on the issue of transparency would bring more clarity and security to the consumer. In Germany such a provision on transparency through the use of labelling can be found in Article 95(d) of the German copyright law. It states that content protected by technological measures should be clearly marked and indicate the properties of these measures. Companies that protect their works with technological measures should mark these with their name and postal address to enable claims for certain copyright limitations in Article 95(b)(2).181
The German provision addresses the questions identified earlier: (1) if DRM technologies are used and (2) how they may work (marking the provi- sions). If a CD can only be played on a certain CD player, this must be clearly stated. The provision also addresses the question (4) who the user of the DRM system is and how he may be contacted (providing name and postal address). The latter question is also covered by the Distance Contract Directive and Electronic Commerce Directive. These Directives, however, seek more information to be provided to the consumer during a commercial transaction.
Distance Contract Directive and Electronic Commerce Directive
The Distance Contract Directive and the Electronic Commerce Directive ap- ply to both products and services and more specifically address online con- tracting. Both Directives provide transparency provisions that obligate the supplier to give certain information to the consumer. For the consumer this information is intended to make a more well-informed decision. The Direc- tives also look at so called click-wrap contracts that may accompany a DRM scheme: in a clickwrap contract the consumer must agree to the contractual terms that govern software or a site by pressing a button or clicking on a link182
(see below under Contracts). These contracts are typical for online music sites like Apple’s iTunes Music Store.
The Distance Contract Directive requires that before the contract is con- cluded the consumer is given information on, amongst other things, the supplier’s name (Article 4(1)(a)), the main characteristics of the goods or services (Article 4(1)(b) and the total price (Article 4(1)(c). Notably, the con- sumer has the right to withdraw without penalty or justification (Article 6(1)). It is argued that the right of withdrawal also applies to clickwrap li- censes that accompany goods and services on the Internet, such as the online delivery of music.183
A consumer who purchases a commodity through an online click-wrap contract and is unaware that the commodity is governed by restrictive DRM, might theoretically withdraw from the trans- 181 Schippan (2004), p. 196. 182 Gasser et al. (2004), p. 14. 183 Guibault (2002), p. 303.
action. However, when it comes to online music services, the right of with- drawal can differ among Member States.184
The Electronic Commerce Directive also requires certain information to be provided in order to enhance transparency and thus the consumer’s abil- ity to make a well-informed decision: the name and geographic and elec- tronic address of the provider of the service (Article 5(1) (a)(b)(c)), a clear indication of the price (Article 5(2)), information on which codes of conduct apply and where to consult them electronically (Article 10(2)) and the obli- gation to make the contract terms and general conditions available in a way that allows the consumer to store and reproduce them (Article 10(3)). Arti- cle 9(1) states that “Member States shall ensure that their legal system al- lows contracts to be concluded by electronic means.”
This sum of conditions, in both Directives, is provided to secure the transparency of the contracting process for the consumer. It is noted that the clickwrap licenses generally adhere to such conditions as the possibility of electronic storage and reproduction, and that its existence and content are known before the sale.185 However, even if this is the case, and online
contracts provide the information requested by the Directives, then the fair- ness of the contract is not (yet) established.
Unfair B2C Commercial Practices Directive (Proposal)
The protection of consumers in commercial transactions has been the sub- ject of two green papers and resulted in a proposal for a new Directive: the Unfair B2C Commercial Practices Directive. Though not European law as such yet, this Directive reflects much of the current European general con- sumer protection policy and aims to amend current Directives in this field. It provides a single set of common rules to regulate business-to-consumer practices, both to take down cross-border barriers for companies and give consumers extra protection.
Average Consumer
The draft Unfair B2C Commercial Practices Directive uses the definition of the average consumer, which is laid down in Article 2(b): “‘average con- sumer’ means the consumer who is reasonably well informed and reasona- bly observant and circumspect”. In Article 5(2) of the Directive this defini- tion is modulated in the event that a specific group is targeted, at which point the characteristics of the average consumer of that group are taken into account.
According to Recital 35 the definition of Article 2(b) incorporates the standard for the average consumer established by the European Court of Justice.186 Both the definition and the standard reflect a policy based on the
image of the consumer as an active and critical information-seeker. This brings a higher threshold of proof for consumers than in some Member States. Nordic countries use the idea of the passive glancer, which presumes 184 Gasser et al. (2004), p. 21. 185 Gasser et al. (2004), p. 21. 186
that consumers make their decision on the basis of an overall impression and not a thorough investigation of the relevant facts.187
Under the average consumer standard, a consumer is expected to make the best use of the offered labelling on products and investigate the contract terms that are applicable on his transaction.188
The proposal Directive does not look at contract terms as such (Article 3(2)). It can, however, be applied to questions of legality surrounding the commercial transaction, such as a sufficient and transparent provision of information about a product.
Misleading Practice
A commercial practice, which “[…] omits material information that the av- erage consumer needs, according to the context, to take an informed trans- actional decision and thereby causes or is likely to cause the average con- sumer to take a transactional decision that he would not have taken other- wise” is regarded as misleading (Article 7(1)) and as such deemed unfair and prohibited (Articles 5(3)(a) and 5(1)). Recital 30 states that this (Article 7(1)) “provision(s) apply all the same elements as are contained in the general prohibition but function independently of it.”189 The general prohibition
functions as a safety catch, but to be called into action the practice must also be “contrary to the requirements of professional diligence” (Article 5(2)). Professional diligence means that a “measure of special skill and care exer- cised by a trader commensurate with the requirements of normal market practice towards consumers in his field of activity in the internal market” (Article 2(j)).
A recent French court case, while based on French consumer protection law, may be an example of a misleading practice in the sense of the draft di- rective.190 At stake was the insufficient labelling of a CD jacket by EMI Music
France. The original text on the label was: This CD contains a technical measure limiting the copying possibilities. This label did not indicate that the CD in question could not be played on certain devices, specifically cer- tain car stereos. The court considered that by not sufficiently informing the public about this, EMI had been guilty of a misleading practice vis-à-vis the scope of playability of the CD. The company should have taken into account questions of compatibility and this scope as part of its professionalism. EMI was ordered to refine the labelling to make it clear what consumers could expect from the offered product. The court mandated a new text for the label on the CD jacket. Referring to the CD it reads: Attention, it cannot played on all devices or car stereos.
187 Wilhelmsson (2000), p. 19. 188 Idem, pp. 17-18. 189
Recital 56 adds: “That means that if a commercial practice is found to be either ‘mis- leading’ or ‘aggressive’ it will automatically be unfair, without any further reference to the conditions contained in article 5.”
190
Association CLCV / EMI Music France, Tribunal de Grande Instance de Nanterre 6ème chambre, 24 June 2003. In appeal this decision was affirmed, compare EMI Music France / CLCV, Cour d’appel de Versailles 1ère chambre, 1ère section 30 septembre 2004, available at
Enforcement
Article 11(1) of the draft Directive looks at the enforcement of this legal ac- tion against unfair practices, and states that Member States shall ensure that both individual consumers and consumer organisations may bring such action. The possibility for consumer organisations to engage in court proce- dures is important in the protection of individual consumer rights. It may ensure that financial hurdles do not prevent legal action. Representation by consumer organisation is widely integrated in and recognised by national consumer protection law and laid down in the European Injunction Direc- tive.191
Concluding Remarks
A lack of transparency in the use of DRM and related contracts may make it difficult for the consumer to make an informed decision. This may have a negative influence on the enforcement of his rights and realization of his in- terests. If European consumer policy takes the information-seeking con- sumer as a basis for the granted protection, a consumer should have the chance to find information in the first place. The Distance Contract Directive and Electronic Commerce Directive and the current proposal of Unfair B2C Commercial Practices Directive might provide for protection of consumer interests in transparency and enforce of legal action against DRM control- lers. Recent French litigation shows that consumers may have some legal standing through (national) consumer protection law vis-à-vis the informa- tion provision related to DRM systems (in particular the labelling obliga- tion).
A more DRM specific attempt of legislation in this area, that in part reso-